The N Files: Anhydrous Ammonia vs. UAN

This week -- Fertilizer prices ticked lower across the board on the week with all four forms of nitrogen in our survey softening. Anhydrous gave the most ground, but that may be a sign of things to come. UAN 28% was the form of nitrogen that fell the least of all four and we believe that UAN solutions are the nitrogen source that will help get nutrient reduction off the ground. The U.S. is generally short on UAN and what supplies don't come from domestic sources will have to rely on export nations including Egypt and Ukraine.

Synchronized applications of liquid nitrogen are hailed as part of the nutrient runoff solution. As more growers opt for split nitrogen applications, fall anhydrous ammonia use is expected to decline. Targeted nitrogen applications give growers the ability to adjust crop nutrition according to the specific needs during a specific year. Remember the spring of 2013 when early precipitation had agronomists warning growers that nutrient runoff potential was high. Crop producers who were in a position to utilize split applications were able to take trips between the rows and replace the N that was lost, post-emerge, many using UAN solutions. We expect high demand for UAN solutions in the coming spring and beyond.

Domestic nitrogen production is on its way and is not expected to eliminate the need for nitrogen imports altogether. However, Egypt and Ukraine are both currently making headlines for political unrest. Ukraine is on the brink of revolution -- again -- as the people have taken to the streets of Kiev, voicing their support of an Association Agreement with the European Union. President Yanukovych, however, is leaning back toward mother Russia who has designs on Ukraine for membership in its own Customs Union. Egypt is not much better off with similar reports of tension between the will of the people and the ways of those in power.

Should Egypt or Ukraine erupt into civil war, industrial production could be interrupted just as American growers begin to lean more heavily on nitrogen from UAN. Increased demand against supplies crimped by war would hold prices high and could derail the shift in the U.S. to targeted, in-season applications. There are a few domestic nitrogen projects underway and those will help limit our reliance on imports from far flung locales, but these plants won't really be humming for a few years.

This week anhydrous fell $4.55/short ton as UAN 28% fell only 97 cents. One week does not make a story, but there is a glimmer of things to come here. If we widen our view to the year-on-year figures, anhydrous is nearly $230.00 below year ago pricing; urea is right at $110.00 below year-ago but UAN28% has fallen only $55.00 below year-ago.

Refreshed management practices aimed at nutrient reduction can improve crop nutrition and help maximize N uptake and on those grounds, USDA ERS expects growers to benefit economically and agronomically from increased reliance on UAN applications. But the increased demand is likely to limit downside price potential for UAN and in this year, when fertilizer purchases were put off till spring by more than a few, fertilizer knows who is buttering the bread.

The following is an updated table of nitrogen pricing by state by the pound of N.

Nitrogen pricing by pound of N -- 12/31/13

Anhydrous $N/lb

Urea $N/lb

UAN28 $N/lb

UAN32 $N/lb

Iowa

$0.39

$0.51

$0.59

$0.55

Illinois

$0.41

$0.53

$0.55

$0.56

Indiana

$0.41

$0.53

$0.59

$0.59

Wisconsin

$0.41

$0.47

$0.52

$0.48

Minnesota

$0.40

$0.48

$0.57

$0.58

South Dakota

$0.41

$0.48

$0.59

$0.53

North Dakota

$0.38

$0.49

$0.63

Not reported

Nebraska

$0.35

$0.51

$0.54

$0.53

Missouri

$0.37

$0.51

$0.64

$0.48

Kansas

$0.35

$0.49

$0.54

$0.53

Ohio

$0.41

$0.56

$0.50

Not reported

Michigan

$0.46

$0.49

$0.55

$0.53

Average

$0.39 1/2

$0.50 1/2

$0.56 3/4

$0.53 1/2

Year-ago

$0.54

$0.62

$0.66

$0.65

Corn --

December 2014 corn opened today at $4.50 1/2 -- 2 1/2 cents below the previous N Files. At trendline 160bu/acre and one retail short ton of anhydrous ammonia at $654.79, the ZCZ14-NH3 spread widened 10.03 points on the week to stand at -30.81. A negative number here indicates anhydrous is priced below December 14 corn futures.

Favorable weather in Argentina is limiting price strength for U.S. corn futures. A bumper crop from South America would expand the global supply situation and limit any potential price recovery here in the States.

Wholesale --

MosaicCo. reports wholesale urea moved slightly higher out of Ukraine and in the Cornbelt on the week, slightly lower at NOLA and sideways at Middle Eastern locations. Ammonia continued sideways -- unchanged for several weeks at $450.00/ton.